Tuesday, April 17, 2007

Click go the Cheers Boys .....

Google has just announced that they are acquiring ad management company DoubleClick for the sum of US$3.1 billion in cash. There are a few things about this which are of note.

The first thing is that DoubleClick has been around for a LONG time in the online advertising space. Being a bit of a veteran myself in this industry (I can’t wait until I get Seniors Parking in SecondLife) I remember when DoubleClick first emerged in the second half of the nineties. Their idea was revolutionary then – attach some custom code to the display advertising used on websites and use it to automate the management, measurement and commerce around online advertising. Like most of the companies that were around then, I got the impression that they had to weather some tough storms as the business, the technical infrastructure and the rest of the world caught up with their vision. From my perspective, these were some guys with a big idea in a market which was then not quite big enough for it. Fast forward to today and they are a company which is clearly a market leader and clearly very valuable. Well done DC Guys!

The second observation is that this is an interesting acquisition for Google. They have bought one of the largest players in the digital display advertising space. Add this to their existing capabilities in search advertising, video advertising and their plays with print advertising and so on, and it appears that a piece of the puzzle (which it would have been VERY tempting for them to build in house) has just been added which really rounds out the offering for Google. No matter where you want to advertise, you can buy it from Google. I’d have to think that this puts further pressure on the traditional media buying relationships. The guys who used to be big in a particular segment or a particular geography are now under competitive threat from a competitor who is HUGE everywhere…. What does this mean for the local online media buyers who’s annual revenues are a fraction of the interest costs on the funds applied to this transaction…..

The third observation is that there is clearly a “race to scale” play going on here. Google are a very smart company and they clearly have the strategy of being number one in each offering in each market. US$3.1 billion invested here is but one option which would have been available to Google (they could have aggregated smaller players, maybe taken a multi-geography approach or as I said above, even toyed with the idea of having a go themselves) but al of these would have taken TIME to reach the scale required to achieve a “Number 1” strategy. By thumping down the cash they have created an opportunity to dominate another segment of the digital advertising market …. And changed he horizons for many companies in many markets around the world.

My fourth (and final) observation is that these guys paid, US$3.1 billion … in CASH. A business that throws that sort of cash from operations is incredibly powerful. For market segments where geographic boundaries are irrelevant (like media buying is now) this creates a new competitive terrain and will accelerate the challenges for those companies who have been a bit slow establishing their strategies to survive or thrive in this new Digital Services age….

Wednesday, April 11, 2007

I Have Caught Lihiriatum Digitalis ....

I am sitting on the balcony of a friend's place on Lihir Island, a small, extinct (I hope!) volcano on the western edge of the Pacific Ocean and part of the beautiful country of Papua New Guinea. My friends have been bought here by the gold mine, a rich ore body in the caldera of the now extinct volcano. One of the few independently held gold mines in the world (Rio Tinto sold out their share a few years ago) it is an awesome enterprise - and it is one of the most ecologically friendly gold mines in the world.

The gold mine is the largest geo-thermally powered gold mine in the world. While working inside the caldera of a volcano does present its challenges (the rocks are warm underfoot and try working with explosives when the temperature inside the drill holes gets up over 140 degrees celcius!), when the volcano is in the tropics and it RAINS A LOT (over 7 metres a year), one side benefit is naturally occuring steam .... and lots of it! Lihir Gold Limited uses this steam to power two geothermal power stations which produce around 56 MW of power and power a big chunk of the production process (and the township).

I could go on about the mine (clearly a man never grows out of his fascination with Tonka Toys... some of the machines are really COOL!) and maybe I will in other places, but this blog is about the impact of Digital Services and the things I see as I go about my work and travels.

For the people who live on the island and work in the mine, the internet has fundamentally changed their lives. The mine has installed a fairly significant internet link to the island and this extends to services such as internet access in all company buildings and wireless internet access in the residential areas. For the residents, this is an important connection to the outside world and to families, friends and services which were once, literally half a world away - and this, in discussions with some of the locals, means a big difference in quality of life. Necessities (or luxuries) are now available at the click of a button and the regular freight services mean that many of the things the locals were previously deprived of are now able to be ordered and delivered. This is helping the people stay longer, enjoy their time here more and that is good for the community and good for the business.

For the company, it is also clear that the internet is changing the world. Supply to the island and the mine is more competitive than ever and it is clear that the benefits are filtering through to the operations. The amount of information to support the operation and about new products and innovations is extensive, changing the way the people who run the mine plan, innovate and operate their business.

It has been good to come somewhere as "real" as Lihir to see how the technology and services we have been working on for more than a decade are really making a difference. Living here in a digitally connected environment no longer means that the place these people choose to live and work in defines the opportunity and lifestyle they have available. I am writing this blog from a tropical paradise and have done banking, managed a couple of share investments and even sent a present to a friend while I have been here... looking at a Lihirian Sunset with a cold SP Lager in my hand, it is easy to imagine catching Lihiratum Digitalis.....

When I contemplate this community and this business a decade ago with basic telephone services and compare it to today and the luxury of online commerce and digital services, I get a clear sense that this is a very tangible example of how we have really changed the world.